Schaeffler Group back to profitable growth Full Year Results 2010 Analyst Conference March 29 th, 2011
Disclaimer This presentation contains forward-looking statements. The words "anticipate", "assume", "believe", "estimate", "expect", "intend", "may", "plan", "project", "should" and similar expressions are used to identify forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about Schaeffler Group's beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Schaeffler GmbH. Forward-looking statements therefore speak only as of the date they are made, and Schaeffler Group undertakes no obligation to update any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. These statements are based on Schaeffler GmbH management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Actual results may differ from those set forth in the forwardlooking statements as a result of various factors (including, but not limited to, future global economic conditions, changed market conditions affecting the automotive industry, intense competition in the markets in which we operate and costs of compliance with applicable laws, regulations and standards, diverse political, legal, economic and other conditions affecting our markets, and other factors beyond our control). This presentation is intended to provide a general overview of Schaeffler Group s business and does not purport to deal with all aspects and details regarding Schaeffler Group. Accordingly, neither Schaeffler Group nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance should be placed on, the accuracy or completeness of the information contained in the presentation or of the views given or implied. Neither Schaeffler Group nor any of its directors, officers, employees or advisors nor any other person shall have any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or otherwise arising in connection therewith. The material contained in this presentation reflects current legislation and the business and financial affairs of Schaeffler Group which are subject to change and audit. Page 2
Agenda Overview Dr. J. Geißinger Financials 2010 K. Rosenfeld Refinancing K. Rosenfeld Outlook 2011 Dr. J. Geißinger Page 3
1 Overview Worldwide leader in bearings and automotive components 3 strong brands Global Presence Employees: approx. 67,000 worldwide Locations: 180 worldwide Clutch systems Transmission systems Dual mass flywheels Torque converters Rolling and plain bearings, linear guides Engine systems Precision components Rolling bearings for industrial and automotive applications High-precision bearings Aerospace 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Page 4
1 Overview Schaeffler at a glance Global technology manufacturer with leading market positions in various industrial sectors and in the automotive industry Sales 9.5 bn Well-balanced business mix in OEM and aftermarket From standard catalogue products to highly engineered solutions EBIT margin 16% High value-added due to integrated manufacturing processes, superior product quality and outstanding innovation platform Worldwide presence with excellent positioning in growth markets Strong long-term track record of achieving above average growth and sector leading profitability Page 5
1 Overview We create value through our unique skill-set and know-how in basic materials (steel) antifriction bearing design inhouse tools design surface treatment tribology low cost precision manufacturing application engineering expertise aftermarket services condition monitoring Page 6
1 Overview We have a strong track record of profitable growth Sales in EUR bn 6.6 6.8 6.8 4.1% CAGR 9.0 8.9 8.3 7.9 7.3 7.3 9.5 EBIT in EUR bn 13.8% CAGR 1.5 0.5 0.5 0.7 0.8 1.0 1.1 1.1 1.0 0.4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EBIT margin 8% 7% 10% 11% 12% 13% 13% 11% 5% 16% Page 7
1 Overview We are growing in all regions New plants 2001 2010 4 Lanskroun, Czech Republic Skalica, Slovakia 5 6 Kysuce, Slovakia 7 8 Szombathely, Hungary 9 Debrecen, Hungary Brasov, Romania 4 5 7 6 8 9 12 13 Yinchuan, China Anting, China 1 2 10 11 12 14 15 13 16 14 15 16 Taicang 1, China Taicang 2, China Ho Chi Minh, Vietnam 1 2 3 Irapuato, Mexico Puebla, Mexico Sorocaba, Brasil 3 10 Dubai, United Arab Emirates 11 Pune, India Page 8
1 Overview We are well diversified Automotive Business Portfolio Automotive Aftermarket 16% Transmission Systems 41% Sales 2010 = 6,341 mn Engine Systems 26% Chassis Systems 17% Industrial Business Portfolio Industrial Aftermarket 38% 62% Consumer Products Fluids & Pneumatics Heavy Industries Motorcycles Power Generation Production Machinery Power Transmission Railway Wind Power Aerospace Sales 2010 = 3,012 mn Customer Portfolio Customer Portfolio Other customers 47% Other customers 83% TOP 10 Customers 53% of Sales TOP 10 Customers 17% of Sales Page 9
1 Overview Highlights 2010 Automotive division Market growth 2010: 25 % Schaeffler sales growth 2010: 34 % Growth drivers were North America and Asia Pacific, Engine and Chassis with overproportional sales increase Schaeffler contributes strongly to key industry theme: "Enhancing efficiency of combustion engines" Success story 25 years dual mass flywheel Further growth drivers: dry dual clutch system / UniAir Schaeffler Concept Cars "Co 2 ncept-10%" and "Schaeffler Hybrid" Page 10
1 Overview Dry dual clutch system An innovation success story Production volumes 2004: - Project kick-off in R&D 2007: - Start of production - Market launch with first OEM customer (VW) 2008: - First full year of production 2010: - Expansion of production capacities in Hungary and China - New OEM customers (e.g. Fiat) 2011: - Further expansion of production capacities in North America and Mexico - New OEM customers - Production of one million dry dual clutch systems 2004 2005 2006 2007 2008 2009 2010 2011E Page 11
1 Overview Highlights 2010 Industrial division Market growth 2010: 7 % Schaeffler sales growth 2010: 20 % Strongest sales growth in wind power in China as well as in Industrial Aftermarket Sales in Asia Pacific now represent 31% of total Industrial sales All businesses about to reach full capacity levels Start of mass production of Generation C ball bearings Wind Power: Supplier Awards in 2010 from Goldwind (China) and Clipper Windpower (USA) Page 12
1 Overview Industrial division "Growing with the wind" 4Strong double digit market growth in wind power market expected over the next years 4Schaeffler expects to outgrow the market: 4Market leader in bearings for the wind power market 4Excellently positioned to service the fast growing Chinese market 4Covering the entire product portfolio, delivering up to 30 bearing parts in a wind turbine 4Providing innovative products for new market trends (e.g. large single-bearing solutions for direct drive or hybrid solutions) 4Meeting today's market needs with our comprehensive system knowledge in engineering, prototyping, assembly and condition monitoring Page 13
Agenda Overview Dr. J. Geißinger Financials 2010 K. Rosenfeld Refinancing K. Rosenfeld Outlook 2011 Dr. J. Geißinger Page 14
2 Financials 2010 Strong performance on all levels 2010 in EUR mn 2009 in EUR mn in EUR mn 1 Strong sales growth Sales 9,495 7,336 +2,159 2 Excellent operating result EBIT 1,509 446 +1,063 3 Positive net income Net income 63-1,204 +1,267 4 Sustainable positive free cash flow Free cash flow 566-1,400 +1,966 5 Net debt reduced Net debt 5,744 6,131-387 Page 15
2 Financials 2010 1 Q4 sales in line with positive trend Sales Schaeffler Group in EUR bn +29% vs. FY 2009 Sales by region Schaeffler Group share in % / vs. 2009 in % 2.3 2.4 2.2 2.0 1.7 1.8 1.9 2.0 2.2 2.4 2.5 2.5 Asia / Pacific +52% Germany +23% 22% 27% South America +33% 6% Q1 8,905 7,336 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 9,495 2008 2009 2010 Q3 Q4 North America +36% 13% 32% Europe 1 +20% Gross Profit Margin 30% 28% 28% 24% 23% 22% 27% 25% 31% 32% 33% 30% 1) without Germany Page 16
2 Financials 2010 1 Automotive on a high level Industrial catching up Sales Automotive in EUR mn +34% vs. FY 2009 Sales Industrial in EUR mn 1,512 1,491 1,612 1,632 1,603 1,494 1,339 1,134 1,008 1,130 1,351 1,254 788 819 868 820 +20% vs. FY 2009 703 623 642 600 587 750 814 806 5,476 4,743 6,341 3,295 2,513 3,012 Gross Profit Margin Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 2010 26% 24% 23% 16% 17% 20% 27% 24% 29% 29% 31% 27% Gross Profit Margin Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2009 2010 37% 37% 37% 34% 32% 27% 29% 28% 38% 39% Q3 39% Q4 37% Page 17
2 Financials 2010 2 EBIT margin around 16% at record level EBIT Schaeffler Group in EUR mn +1,063 vs. FY 2009 404 398 372 Δ EBIT Schaeffler Group in EUR mn +2,159 329 302 335-954 +60 1,509 204 205 187-83 -119 151 37 71 446 1,040 446 1,509 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2009 2010 Q3 Q4 EBIT FY 2009 Sales COGS R&D Selling Admin & Others EBIT FY 2010 EBIT margin 14% 13% 9% 10% 2% 4% 10% 8% 16% 17% 16% 15% Page 18
2 Financials 2010 2 Industrial division with significant improvement of results EBIT Automotive in EUR mn +722 vs. FY 2009 EBIT Industrial in EUR mn 242 275 255 233 184 149 151 133 145 153 139 156 +341 vs. FY 2009 129 143 139 93 78 65 49 40 31 36 18 447 283 1,005 593 163 504-41 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2008 2009 2010 EBIT Margin 12% 10% 5% 4% -4% 4% 12% 10% 16% 17% 16% 14% EBIT Margin 18% 19% 16% 19% 11% 5% 6% 3% 15% 17% 18% 17% Page 19
2 Financials 2010 3 Positive net income in 2010 Net Income 1) Schaeffler Group in EUR mn Net Income 1) Schaeffler Group in EUR mn 9,495 236 180 147 176-7,986 1,509 Interest Result -810 +47 At-equity Result Oneoff effect -396¹ ) -287 63 55-47 -203-235 39 97 One-off dilution loss of EUR -396 mn -344-357 Sales Costs EBIT Financial Taxes/ Result Minorities Net Income Q1-422 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 1) One-off dilution loss from capital increase Conti of EUR -396 mn. Page 20
2 Financials 2010 3 Cash interest result at EUR 557 mn Interest Result Schaeffler Group 1) in EUR mn Composition of Interest Result Schaeffler Group in EUR mn 810 121 132 289 310 557 323 255 246 224 240 124 170 141 119 234 15 34 428 929 810 Non-Cash Cash Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2009 2010 Q3 Q4 P&L Mark-to-market interest rate derivatives Others Δ Cash Interest expenses financial debt Others / IR hedging 1) For presentation purposes, results are shown as positive figures. Page 21
2 Financials 2010 4 Strong Cash Flow generation Free Cash Flow Schaeffler Group in EUR mn Capital Expenditure Schaeffler Group in EUR mn 2,097-227 292-361 205 231 250 162-557 -386 566 119 98 39 65 51 72 76 978 321 361 Q4 2010 EBITDA Δ Net Working Capital Capex Interest Others Free Cash Flow 515 86-162 -120-279 40 in % of sales Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2010 9% 12% 10% 13% 7% 6% 2% 3% 2% 3% 3% Q4 7% Page 22
2 Financials 2010 5 Leverage ratio reduced to 2.7x Net Financial Debt / Leverage Ratio Schaeffler Group in EUR bn 6.1 6.1 5.0x 5.9 6.1 5.6x 6.0 5.9 5.8 5.7 Available Funds Schaeffler Group in EUR bn 1.0 1.0 1.2 1.1 1.2 1.3 1.5 1.5 4.9x 4.4x 4.2x 3.5x 3.0x 2.7x Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 Q3 Q4 Leverage Ratio (Net Financial Debt / LTM EBITDA) Revolver Bilateral Lines Cash Page 23
2 Financials 2010 We create sustainable value ROCE Schaeffler Group in % ROCE Schaeffler Group in % 25.1 25.1 21.6 15.5 16.5 17.0 16.0 15.5 18.0 7.3 11.2 7.9 7.9 7.3 12.4 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 Page 24
Agenda Overview Dr. J. Geißinger Financials 2010 K. Rosenfeld Refinancing K. Rosenfeld Outlook 2011 Dr. J. Geißinger Page 25
3 Refinancing Current financing structure Status quo 1) Key elements 4 2 CUI Junior Revolver Schaeffler Holding GmbH & Co. KG 1 Junior Term Loan Bullet structure maturing in 2015 and interest rate of 7% p.a. PIK 2) 2 Junior Revolver Not drawn yet 1 3 Junior Term Loan CRP Schaeffler Verwaltungs GmbH ITP- Banks 3) 3 Contingent Remuneration Payment (CRP) Pushes interest rate of Junior facility to 17% p.a. Holding Schaeffler Group 4 Contingent Upside Instrument (CUI) Additional compensation for banks in an amount of 25% of a calculative value appreciation 1 2 Senior Term Loan Senior Revolver 100% Schaeffler Technologies GmbH & Co. KG Schaeffler GmbH 32.9% 42.2% Free Float 24.9% Continental AG Senior Term Loan 1 Bullet structure maturing in 2014 and customary cash interest rates Senior Revolver 2 Only marginally drawn 1) Structure after capital increase Continental AG in January 2010 and before Junior Refinancing 2) Incl. a small cash element 3) M.M.Warburg and Bankhaus Metzler Page 26
3 Refinancing Refinancing concept 3 key elements 1 Refinancing Junior loan 2 Rearranging participation structure Strategic and financial flexibility 3 Converting into a stock corporation (AG) Page 27
3 Refinancing 1 Refinancing Junior Loan: Significant pay down at Schaeffler Holding Refinancing structure Junior (in EUR bn) 7.4 CUI PIK Junior Term Loan -0.4 Excess Cashflow -0.6 Debt Pushdown -1.8 ABO 1) 3/2011 pro forma 3/2011 Total Leverage 7.1x 6.0x Senior (in EUR bn) 2.8 repayment 4.6 4.6 1.7 2.9 Junior Bond Junior Term Loan Key elements 2.8 billion net paydown of Junior Term Loan from Excess Cash Flow, debt pushdown und ABO 1) CUI and Junior Interest crystallized Refinancing through 1.7 billion Junior Bond maturing in March 2018 and 2.9 billion Junior Term Loan maturing in December 2015 5.9 +0.6 +0.4 Net Debt Senior Excess Cash Flow Debt Pushdown +0.1 Others 7.0 7.0 Senior Term Loan Net Debt at Senior level increased to approx. 7.0 billion (interest rates unchanged for the time being) Total leverage ratio (Junior and Senior) reduced Senior Leverage 3/2011 pro forma 3/2011 3.0x 3.5x 1) Proceeds from sale of Continental shares Page 28
3 Refinancing 2 Rearranging participation structure: Increasing holding in Continental New structure Key changes Schaeffler Holding GmbH & Co. KG Schaeffler Verwaltungs GmbH ITP- Banks 1) ABO increases Continental AG Free Float from 25% to approx. 40%; enabling potential DAX re-entry Schaeffler increases participation in Continental AG from 42.2% to 49.9%; upstreaming of approx. 6% of holdings from GmbH to Holding 12-months lock-up for remaining shares of Schaeffler, B. Metzler and M.M. Warburg extended liabilitiy 100% Schaeffler GmbH 13.8% 36.1% 10.4% Free Float 39.7% New shareholder structure Continental AG Schaeffler Verwaltungs GmbH (before: 0%) 13.8% 39.7% Free Float (before: 24.9%) Schaeffler Technologies GmbH & Co. KG Continental AG Schaeffler GmbH (before: 42.2%) 36.1% 10.4% B. Metzler/ M.M. Warburg (before: 32.9%) 1) M.M.Warburg und Bankhaus Metzler Page 29
Agenda Overview Dr. J. Geißinger Financials 2010 K. Rosenfeld Refinancing K. Rosenfeld Outlook 2011 Dr. J. Geißinger Page 30
4 Outlook 2011 Schaeffler creates flexibility for further strategic development Strong operating business Refinancing Junior and rearranging holdings in Continental AG Strategic and financial flexibility Profitable growth above market Page 31
4 Outlook 2011 Well positioned for further profitable growth 1 Key trends will drive sector growth 2 Leading positions in fast growing markets 3 Components, modules and systems We will continue to grow above market 4 Full innovation pipeline Page 32
4 Outlook 2011 1 Key trends will drive sector growth Energy Efficiency / CO 2 - reduction Friction optimized bearings Performance optimized bearings (x-life) Co 2 ncept-10% Regenerative Energies Comprehensive portfolio for wind turbines Simulation of the entire drive train in wind turbines Bearing solutions for new energy technologies Schaeffler defines new standards in modern engineering From Mechanics to Mechatronics UniAir Electromechanic drive train components Bearings with integrated functions E-Mobility Schaeffler Hybrid Car ewheeldrive (wheel hub motor) E-Bike: torque sensor bottom bracket Page 33
4 Outlook 2011 2 Leading positions in fast growing markets Aerospace, Railway Automotive, Consumer Products Market CAGR 2010-2013 +2.5-5.0 % Market CAGR 2010-2013 +5.0-7.5 % Schaeffler sales estimation Above market growth Schaeffler sales estimation Above market growth Production Machinery, Power Transmission Wind Power Market CAGR 2010-2013 +7.5-10.0 % Market CAGR 2010-2013 >10 % Schaeffler sales estimation Above market growth Schaeffler sales estimation Well above market growth Page 34
4 Outlook 2011 2 Aligning regional production with fast growing regions New locations* and plant extensions (2011 2013) 2 3 Kysuce, Slovakia Brasov, Romania 1 2 3 9 10 11 5 4 8 6 7 4 Nanjing*, China 5 6 7 8 Yinchuan, China Taicang 4, China Taicang 5, China Suzhou, China 1 Irapuato, Mexico 9 Savli*, India 10 11 Pune, India Hosur, India Page 35
4 Outlook 2011 3 Great mix of components, modules and systems Content Share Complexity Level Value Added From mechanics to mechatronics Systems Modules Components Page 36 Schaeffler FY2010 Analyst Conference March 29th, 2011
4 Outlook 2011 4 Full innovation pipeline Number of patent registrations Key aspects 1,641 4 Schaeffler is in the Top 4 of the most innovative companies in Germany in 2010 896 1,084 1,276 1,146 4 5,000 employees at 40 locations worldwide develop new and efficient solutions in close cooperation with customers 4 Constant R&D spending rate of 5% of sales 4 More than 16,000 running patents in Germany 2006 2007 2008 2009 2010 Rank in Germany¹ #9 #7 #5 #5 #4 1) Source: German Patent and Trademark Office Page 37
4 Outlook 2011 Key focus areas in 2011 Growth Profitability Sales growth 8-10 % EBIT Margin > 13 % CAPEX 6-8 % of sales Free Cash Flow sustainably positive Quality Innovation Quality policy Zero defects R&D expenses around 5 % of sales Employees Dedicated education for new employees Innovation management Increase of patent registrations Page 38
For questions please refer to Schaeffler Investor Relations Team Phone: +49 9132 82-4440 email: ir@schaeffler.com